‘The Road to Serfdom’ – Fred Hayek

Book Review By: Wendall Krossa

This is a short book review of Fred Hayek’s ‘The Road to Serfdom’, a classic on economics. Joshua Ben Adam would have loved it.

As noted by Bernstein, wealth creation is critical to the development of democracy with all its rights and benefits. Critical to wealth creation is freedom – individual freedom as Hayek states; the forces of spontaneity and freedom. To respond to the Puritan, John Goodwin says, “what is the best thing that we can do with our lives in order to do as much good as we can to as many people as we can?” It appears the best intervention is to promote and to preserve freedom. This is particularly effective because it unleashes the inherent and universal desire in all people for something better and to improve their own lives and situations.

Hayek warns of the growing tendency to rely on administrative coercion and warns of the need to understand how some measures can destroy the bases of a free market and smother the creative powers of a free civilization; how certain economic controls can paralyze the driving forces of a free society (I will summarize, quote and paraphrase his comments in the following).

He says economic planning is a key culprit, and produces unlooked-for results (this idea of unintended consequences is central to Hayek’s material). Socialists themselves are often horrified by these unexpected consequences of their approach. I will cover more on this later.

Hayek argues that totalitarianism is the inevitable consequence of socialist planning. This is because extensive government control produces a psychological change in people; it alters the character of people, producing an attitude of servitude. He notes the trend in democracies for government to increasingly employ legislation to regulate the daily affairs of citizens.

He then clarifies his use of individualism as not being egotism or selfishness, but as something defined by Christianity, ancient philosophy, the Renaissance and now Western civilization – “respect for the individual; recognition of his own views and tastes as supreme in his own sphere; the belief that it is desirable that men should develop their own gifts and bents”, (his use of men can be tolerated better if one recognizes that he is writing in 1942).

It was the change from a rigidly hierarchical organizational system to one where men could shape their own lives and gain the opportunity of knowing and choosing between different forms of life that is closely associated with the growth of commerce. This freedom from traditional ways of doing things led to the conscious realization that the spontaneous and uncontrolled efforts of individuals were capable of producing a complex order of economic activities (our modern healthy functioning economies).

There was a new free use of knowledge here, everything could be tried. This new individualism was damned by critics as the “revolt of the individual against the species”, and this was the force that built our civilization. This is no fixed creed – the fundamental principle that, in ordering our affairs, we should make as much use as possible of the spontaneous forces of society and resort as little as possible to coercion, is capable of infinite application.

He worried that Western societies were abandoning this individualist tradition and that Atlantic essay of a few years back confirms this; what with the new generation being more respectful of and subservient to authority. There is, says Hayek, a trend to replace the spontaneous forces of freedom with collective and ‘conscious’ direction toward deliberately chosen goals. This idea of organization and planning counters the English tradition of freedom.

In Chapter Two, he goes directly to Socialism and argues that socialism is the gravest threat to freedom. From its beginning it was authoritarian and the French writers who laid the foundations for modern socialism knew it could only be put into practice by strong dictatorial government. Saint-Simon, one of the founders, stated that those who did not obey his planning boards would be treated as cattle. Later, strong democratic currents influenced socialism to ally with forces of freedom, before the 1848 revolution.

De Tocqueville saw clearly that democracy, as an essentially individualist institution, stood in irreconcilable conflict with socialism. He said that socialism restricts individual freedom and makes each man a mere agent, a mere number (remember Hegel’s holism here- the greater whole, the state, takes precedence over mere individuals).

To allay any fears, socialism co-opted the craving for freedom and began to promise a new freedom; but where the great apostles of freedom had defined it as freedom from coercion and freedom from arbitrary power of other men, the new socialist freedom was defined as freedom from physical want. This was coupled with the promise of great wealth in a socialist society. This new freedom came to mean a demand for an equal distribution of wealth. Freedom was therefore confused with power or wealth. This resulted in socialism leading to the opposite of liberty (the unforeseen consequences of socialism).

Early on in England, more and more people saw that the new tyrannies of fascism and communism were the outcomes of the socialist approach. Max Eastman, Lenin’s old friend, admitted that Stalinism was socialism and was worse than fascism; more ruthless, more barbarous, unjust, immoral, anti-democratic and unredeemed by any hope or scruple. Stalinism was an inevitable, though unforeseen, political result of nationalization and collectivization. Socialism was the road to dictatorship, not to freedom.

Other early socialists also saw all their ideals shattered in socialist countries. Walter Lippman said, “The generation to which we belong is learning from experience, what happens when men retreat from freedom to a coercive organization of their affairs”. As organized direction increases, the variety of ends gives way to uniformity.

Hayek goes on to say that many still believe that socialism and freedom can be combined and many socialists would recoil if they saw that their program means the destruction of freedom.

In chapter 3 he notes that ‘socialism’ is often used to describe the ideals of social justice and greater equality. But in truth, socialism means the particular method by which most socialists hope to attain their ideals. In this sense, socialism means ‘the abolition of private enterprise, of private ownership, of the means of production, and the creation of a system of planned economy, in which the entrepreneur working for profit is replaced by a central planning body’ – Any doubt about this? Check Chavez and Mugabe for examples.

Now Hayek admits we all plan and organize. There is nothing wrong with this. The dispute is not over intelligently choosing between the various possible organizations of society, or employing foresight and systematic thinking in planning our affairs; the dispute is between demanding a central direction of all economic activity according to a single plan, laying down how the resources of society should be consciously directed to serve particular ends in a definite way. It also allows the better option of the holder of coercive power, to confine himself in general to creating the conditions under which the knowledge and creativity of individuals are given the best scope, so that they can plan most successfully.

The rational utilization of our resources does not require central direction or organization of all our activities according to some consciously constructed blueprint. He goes on to note that competition is superior because it is a more efficient method by which our activities can be adjusted to each other without coercive or arbitrary intervention of authority. It dispenses with the need for conscious social control – and so much more.